Pizza Hut has successfully defended a multi-million dollar damages case over the disastrous impact of its strategy to enforce a $4.95 pizza price on its franchisees. The Federal Court appeal, launched by liquidator Bob Jacobs at Auxilium Partners with the backing of franchisees, had alleged former Pizza Hut franchisor, US-based Yum Restaurants!, acted unconscionably by enforcing its cut-price value strategy which it said was “certain to fail”. The case had threatened to set a precedent for franchisors that would hold them accountable for strategies that damaged their franchise network. But a full court, made up of Justices John Gilmour, John Nicholas and Mark Moshinsky, ruled on Tuesday that Yum had not acted unreasonably and “had a legitimate interest in adopting the value strategy”. “The franchise structure established by [its franchise] agreement gave Yum broad discretionary powers. “Ultimately, Yum pays a commercial price if it makes poor business decisions, as returns from Franchisees will fall and fewer people will want to be franchisees.”
Source: www.afr.com
Subscribe to our free mailing list and always be the first to receive the latest news and updates.